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Contact:
Loretta Worters; 212-346-5545; lorettaw@iii.org

NEW YORK, Jan. 16, 2002 -- Leaders of the property and casualty insurance industry believe that profitability in both commercial and personal lines will improve in 2002 compared with last year, according to a survey conducted by the ̽»¨¾«Ñ¡ Information Institute (I.I.I.) at its sixth annual Property/Casualty ̽»¨¾«Ñ¡ Joint Industry Forum, held here.

Eighty-nine percent of executives believe the combined ratio, a percentage of each premium dollar a property/casualty insurer spends on claims and expenses, will fall. The combined ratio for 2002 is estimated at 108, according to I.I.I.'s recent survey of analysts.

Asked if insurers thought the hardening of the p/c commercial market would continue through 2002, 91 percent thought it would. Seventy-nine percent also thought the hardening of the personal lines market would continue through 2002.

Broken down by lines of insurance, 61 percent of respondents expect auto insurance to be more profitable in 2002. Sixty-five percent of respondents predict the homeowners line to improve from last year, despite the large number of catastrophes, the high cost of home repairs and the emergence of mold claims.

"Industry leaders are clearly anticipating signs of improvement in the year ahead," said Robert Hartwig, chief economist and senior vice president of the I.I.I. "However, the environment remains very challenging. Rapidly rising jury awards, accelerating medical inflation and new types of claims will continue to put pressure on insurers."

Sixty-five percent of CEOs expect an improvement in profitability in 2002 for the workers compensation market. Workers compensation claims arising from the
September 11 terrorist attacks are expected to cost insurers $3.5 billion, by far the largest workers compensation loss in history.

Other commercial lines will also see an improvement in profitability in 2002.

"The current hard market was already well under way before September 11, with renewals in most major commercial lines in the 10 percent to 15 percent range," said Hartwig. "After September 11, the rate of increases for 2002 renewals in many of those same lines roughly doubled to 30 percent, on average. In individual cases, premiums have increased even more, depending on the nature of the business, profile and location of commercial property and concentration of employees and customers."

Less consolidation among insurers and reinsurers can be expected in 2002, according to 56 percent of the Forum survey participants.

Seventy percent of respondents are doubtful that Congress will pass a bill establishing a federal "backstop" for the p/c industry in 2002. However, if such legislation were signed into law, two-thirds believe it would significantly increase the availability of terrorism coverage, which as it now stands has been excluded from most commercial policies.

"Without a federal ?backstop,' availability of insurance will continue to suffer," said Hartwig. "It will also take longer for the industry to build the capital and confidence to underwrite this new risk, which will have an impact on the broader economy for at least the next year."

CEOs were also gloomy about legislative changes in the area of asbestos. Ninety percent of respondents do not expect Congress to pass and President Bush to sign legislation in 2002 that will help contain the current asbestos crisis.

Seventy-five percent of respondents also noted that the pace of convergence in financial services will slow in 2002.

CEOs felt that there would be little or no progress on tort reform. Seventy-two percent felt this year would be a wash. Yet more than half the respondents felt there would be progress in fighting fraud in 2002.

The Property/Casualty ̽»¨¾«Ñ¡ Joint Industry Forum was created to provide leaders from the widest spectrum of the industry with an opportunity to meet with each other in discussion of topics of general interest.

Forum participants included more than 350 representatives from property and casualty insurance and reinsurance companies and organizations. Of these, roughly 40 percent responded to the survey.

Survey questions and answers can be found at /media/hottopics/hot/jointindustryforum/